Yesterday was perhaps the best trading day of my life, particularly with respect to timing and psychological management. For that reason, I hardly slept at all. I went to bed worried. I woke up every hour worried. And I got up worried. I was practically shaking when I fired up my iPad and was relieved to see the equity futures all still red (although not as much as they had been). What’s on my mind is straight from my trading rules:
VIII. EMOTIONAL AWARENESS IS YOUR GREATEST ASSET – Feeling super-confident and giddy? You should probably be in all cash. Feeling demoralized, frustrated, and out of synch? You’re probably close to a great entry point.
I wouldn’t say I was “super-confident and giddy”, but if I’m feeling this good, yeah, I get very uneasy.
The market’s about to open, so let me share just one chart and talk about three arrows, from left to right:
The first arrow is the gap down on Sunday, which was remarkable. I was definitely in “I’m not short enough” mode at that time.
The second arrow was the rather comic screw-up in which algos though the White House was going to suspend tariffs for 90 days, when in fact it was just a verbal tic on the part of a White House spokesman which caused a $2 trillion pop and fall.
The third arrow, which was seriously the basis for a huge amount of my entries yesterday, was the recapture of the same level, which to me was kind of a safe zone, since I felt the market had already revealed where it would go in a best-case scenario. It was like being in Elementary School and getting a hold of the answer sheet. I already knew the right answer.
What’s kind your ceaselessly-worried buddy worried now is those two lines I’ve drawn. Recent activity suggests, short term, some strength mounting, particularly since the market didn’t get obliterated on the latest tit-for-tat 84% additional tariff news from China in the wee hours of this morning. In addition, last night’s overnight action didn’t get below Sunday’s, which is a “higher low” scenario that makes me wonder if the bad news simply isn’t going to pummel the market any lower.
In the meanwhile, we’re all still living in a world in which the most important thing is a staring contest between China and the United States.
